GE And Indias Three Is

Updated: Jul 8 2003, 05:30am hrs

Over the weekend I had a visitor from a European power equipment manufacturer which has been in India for years. He was excited over the passage of the Electricity Bill and said his company now sees great opportunity in the country. Things had been sluggish for awhile but he said sales could actually double in the next two years.

I asked if the competition didnt worry him. After all, American companies like GE were in the same game and could get very aggressive if they smelt an opportunity. Oh, the Yanks dont bother us at all, they dont understand India, they dont have the patience to stick on in this country especially if they have to deal with the government.

And then he went on to pose a question to me: How do you think a European company would have reacted if it had been in an Enron-like situation He was, of course, referring to Dabhol and not what happened to the crooked E later. He went on to answer it himself: We would have pulled out alright, but would have done it quietly. After all, we know we have to come back here to do business some other time.

My earlier question on GE was just to provoke him, though. I had got my answer to that earlier in a conversation with Scott Bayman, President and CEO of General Electric India. I told him that he must be thrilled now with both, the passage of the Electricity Bill and with Air India and Indian Airlines looking to beef up their fleets. After all power equipment and jet engines form a large part of GEs business worldwide. He didnt appear excited at all. He said the private Indian airlines had been good customers so far but for power, well, he didnt quite say he didnt have the patience but gave the impression that hed believe the opportunity when state electricity boards were finally reformed.

Bayman has been in India since April 1992. That was the year India was declared a priority country in GEs global initiative. GE had been quietly bullish about India since the late 80s. In Baymans words, Rather than an overpopulated, poor and bureaucratic country, GE saw India as the fifth largest economy and a country with almost one billion people...many of them potential customers for its products and services.

GE made a mistake with that vision of India. Its billion people just dont seem to have the money in hand to make the country an attractive enough market for it. Bayman, about 16 months ago in an address to businessmen in Washington, blamed this on the Indian politician: Rather than government by consensus, India has largely functioned instead as a government by lowest common denominator. That, he said, had kept India from making the radical second generation reforms needed to attract investment into infrastructure and spur industrial growth. But he says that in the nearly year and a half since he made that speech, things have changed for the better in the last 16 months with the progress of divestment and fall in telecommunication rates bringing them closer to international levels, but thats another story.

By 1995 Bayman made a mid-course change in strategy. While the great infrastructure and industrial market seemed so far away because they were too dependent on government policy, Bayman decided the big Indian advantage was the ordinary Indian India is rich with bright, young talent. Engineers and managers who are eager to learn and contribute immediately. So thats where the focus turned, to intellectual sourcing. ITES, IT enabled services or business process outsourcing, of course form an important part of GEs $600 million investment in India and employs nearly 15,000 people. But the company also used Indias highly skilled engineers to run its biggest medical diagnostic equipment business outside the US. This highly technology-intensive business in India will grow to over half a billion by 2005, says Bayman.

So, has GE lost out by being too impatient with Indian red tape, I wonder. It shifted its focus on heavy manufacturing to China and slashed costs worldwide by transferring its back-office operations to India. It may lose out on orders for power equipment and jet engines, but its bet on the private Indian citizen has certainly paid of well for both.

The author is executive editor of CNBC-TV18. GE is a partner in CNBC-TV18